FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

              (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT of 1934

                  For the quarterly period ended June 30, 2004
--------------------------------------------------------------------------------

                                       OR

             ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT of 1934

For the transition period from _______________________ to ______________________


                             Commission file number
                                     0-21558
                     ---------------------------------------


                            CNL Income Fund XII, Ltd.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            Florida                                       59-3078856
-------------------------------               ----------------------------------
(State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                       Identification No.)


        450 South Orange Avenue
            Orlando, Florida                                 32801
----------------------------------------      ----------------------------------
(Address of principal executive offices)                   (Zip Code)


Registrant's telephone number
(including area code)                                    (407) 540-2000
                                              ----------------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Sections  13 or 15(d)  of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes X No ____

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act):Yes___ No X

<PAGE>

                                    CONTENTS



Part I                                                                     Page

   Item 1.    Financial Statements:

                  Condensed Balance Sheets                                 1

                  Condensed Statements of Income                           2

                  Condensed Statements of Partners' Capital                3

                  Condensed Statements of Cash Flows                       4

                  Notes to Condensed Financial Statements                  5-6

   Item 2.    Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                      7-9

   Item 3.    Quantitative and Qualitative Disclosures About
                  Market Risk                                              9

   Item 4.    Controls and Procedures                                      10

Part II

   Other Information                                                       11-12

<PAGE>

                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                            CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C>

                                                           June 30,               December 31,
                                                             2004                     2003
                                                       ------------------      -------------------
                             ASSETS

Real estate properties with operating leases, net      $      23,500,839       $       23,568,215
Net investment in direct financing leases                      4,376,230                4,443,493
Real estate held for sale                                      3,435,797                5,852,410
Investment in joint ventures                                   1,740,907                1,749,787
Cash and cash equivalents                                      5,204,819                2,084,914
Certificates of deposit                                          553,231                  550,991
Receivables, less allowance for doubtful accounts
    of $148,553 and $170,957, respectively                        17,833                    9,454
Accrued rental income, less allowance for doubtful
    accounts of $8,757 and $9,061, respectively                2,089,132                2,071,075
Other assets                                                      42,869                   47,580
                                                       ------------------      -------------------

                                                       $      40,961,657       $       40,377,919
                                                       ==================      ===================

               LIABILITIES AND PARTNERS' CAPITAL

Accounts payable and accrued expenses                  $          30,143       $           25,794
Real estate taxes payable                                         34,250                   16,504
Distributions payable                                            956,252                  956,252
Due to related parties                                            31,657                   19,503
Rents paid in advance and deposits                               223,886                  241,936
                                                       ------------------      -------------------
    Total liabilities                                          1,276,188                1,259,989

Minority interests                                             1,206,630                1,217,270

Commitment (Note 4)

Partners' capital                                             38,478,839               37,900,660
                                                       ------------------      -------------------

                                                       $      40,961,657       $       40,377,919
                                                       ==================      ===================
</TABLE>

           See accompanying notes to condensed financial statements.

                                       1
<PAGE>

                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                         CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
<S> <C>

                                                            Quarter Ended                    Six Months Ended
                                                              June 30,                           June 30,
                                                        2004             2003             2004             2003
                                                   --------------   --------------   --------------   --------------
Revenues:
    Rental income from operating leases            $     752,404    $     751,423    $   1,499,867    $   1,494,390
    Earned income from direct financing leases           148,744          127,451          266,899          263,544
    Contingent rental income                              14,375           10,858           18,110           16,022
    Interest and other income                             30,248            2,799           32,163           10,751
                                                   --------------   --------------   --------------   --------------
                                                         945,771          892,531        1,817,039        1,784,707
                                                   --------------   --------------   --------------   --------------

Expenses:
    General operating and administrative                 111,295           67,806          217,235          153,184
    Property related                                       7,939            3,688           14,842            7,363
    Management fees to related parties                    10,276           11,220           21,256           22,028
    State and other taxes                                     --               --           54,905           42,995
    Depreciation and amortization                        135,995          136,894          269,660          270,479
                                                   --------------   --------------   --------------   --------------
                                                         265,505          219,608          577,898          496,049
                                                   --------------   --------------   --------------   --------------

Income before minority interests and equity in
    earnings of unconsolidated joint ventures            680,266          672,923        1,239,141        1,288,658

Minority interests                                       (27,648)         (28,110)         (55,484)         (56,524)

Equity in earnings of unconsolidated joint
    ventures                                              39,419           42,037           75,509           84,202
                                                   --------------   --------------   --------------   --------------

Income from continuing operations                        692,037          686,850        1,259,166        1,316,336
                                                   --------------   --------------   --------------   --------------

Discontinued operations:
    Income from discontinued operations                  107,873          149,174          262,568          282,807
    Gain on disposal of discontinued operations               --               --          968,949               --
                                                   --------------   --------------   --------------   --------------
                                                         107,873          149,174        1,231,517          282,807
                                                   --------------   --------------   --------------   --------------

Net income                                         $     799,910    $     836,024    $   2,490,683    $   1,599,143
                                                   ==============   ==============   ==============   ==============

Income per limited partner unit:
    Continuing operations                          $        0.15    $        0.15    $        0.28    $        0.29
    Discontinued operations                                 0.03             0.04             0.27             0.07
                                                   --------------   --------------   --------------   --------------
                                                   $        0.18    $        0.19    $        0.55    $        0.36
                                                   ==============   ==============   ==============   ==============

Weighted average number of limited
    partner units outstanding                          4,500,000        4,500,000        4,500,000        4,500,000
                                                   ==============   ==============   ==============   ==============
</TABLE>

           See accompanying notes to condensed financial statements.

                                       2
<PAGE>

                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                    CONDENSED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
<S> <C>

                                                Six Months Ended         Year Ended
                                                    June 30,            December 31,
                                                      2004                  2003
                                               ------------------    ------------------

General partners:
    Beginning balance                          $         259,109     $         259,109
    Net income                                                --                    --
                                               ------------------    ------------------
                                                         259,109               259,109
                                               ------------------    ------------------

Limited partners:
    Beginning balance                                 37,641,551            38,228,265
    Net income                                         2,490,683             3,238,294
    Distributions ($0.43 and $0.85 per
       limited partner unit, respectively)            (1,912,504)           (3,825,008)
                                               ------------------    ------------------
                                                      38,219,730            37,641,551
                                               ------------------    ------------------

Total partners' capital                        $      38,478,839     $      37,900,660
                                               ==================    ==================
</TABLE>

           See accompanying notes to condensed financial statements.

                                       3
<PAGE>

                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                       CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C>

                                                                         Six Months Ended
                                                                             June 30,
                                                                     2004             2003
                                                                --------------   --------------


Net cash provided by operating activities                       $   1,941,149    $   1,954,089
                                                                --------------   --------------

Cash flows from investing activities:
    Proceeds from sale of assets                                    3,357,384               --
    Additions to real estate properties with operating leases        (200,000)              --
                                                                --------------   --------------
        Net cash from investing activities                          3,157,384               --
                                                                --------------   --------------

Cash flows from financing activities:
    Distributions to limited partners                              (1,912,504)      (2,025,004)
    Distributions to holders of minority interests                    (66,124)         (66,770)
                                                                --------------   --------------
        Net cash used in financing activities                      (1,978,628)      (2,091,774)
                                                                --------------   --------------

Net increase (decrease) in cash and cash equivalents                3,119,905         (137,685)

Cash and cash equivalents at beginning of period                    2,084,914        1,274,469
                                                                --------------   --------------

Cash and cash equivalents at end of period                      $   5,204,819    $   1,136,784
                                                                ==============   ==============

Supplemental schedule of non-cash financing
    activities:

    Distributions declared and unpaid at end of
        period                                                  $     956,252    $     956,252
                                                                ==============   ==============
</TABLE>

           See accompanying notes to condensed financial statements.

                                       4
<PAGE>

                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
              Quarters and Six Months Ended June 30, 2004 and 2003


1.       Basis of Presentation

         The accompanying  unaudited  condensed  financial  statements have been
         prepared in accordance  with the  instructions  to Form 10-Q and do not
         include  all  of the  information  and  note  disclosures  required  by
         generally  accepted  accounting  principles.  The financial  statements
         reflect all adjustments,  consisting of normal  recurring  adjustments,
         which are, in the opinion of the general partners, necessary for a fair
         statement of the results for the interim periods  presented.  Operating
         results for the quarter and six months ended June 30, 2004,  may not be
         indicative  of the  results  that may be  expected  for the year ending
         December  31, 2004.  Amounts as of December  31, 2003,  included in the
         financial   statements,   have  been  derived  from  audited  financial
         statements as of that date.

         These unaudited financial statements should be read in conjunction with
         the financial statements and notes thereto included in Form 10-K of CNL
         Income Fund XII, Ltd. (the  "Partnership")  for the year ended December
         31, 2003.

         The  Partnership  accounts for its 59.05%  interest in  Williston  Real
         Estate Joint  Venture,  its 55% interest in Bossier City Joint  Venture
         and its 80% interest in CNL VIII, X, XII Kokomo Joint Venture using the
         consolidation  method.  Minority interests represent the minority joint
         venture partners' proportionate share of the equity in the consolidated
         joint ventures. All significant  intercompany accounts and transactions
         have been eliminated.

         In December 2003,  the Financial  Accounting  Standards  Board issued a
         revision to FASB  Interpretation  No. 46 (originally  issued in January
         2003)  ("FIN  46R"),  "Consolidation  of  Variable  Interest  Entities"
         requiring  existing  unconsolidated  variable  interest  entities to be
         consolidated by their primary beneficiaries. The primary beneficiary of
         a variable  interest entity is the party that absorbs a majority of the
         entity's expected losses,  receives a majority of its expected residual
         returns, or both, as a result of holding variable interests,  which are
         the ownership,  contractual,  or other pecuniary interests in an entity
         that change with  changes in the fair value of the  entity's net assets
         excluding  variable  interests.  Prior to FIN 46R, a company  generally
         included  another  entity  in  its  financial  statements  only  if  it
         controlled the entity through voting interests.  Application of FIN 46R
         is  required  in  financial  statements  of public  entities  that have
         interests in variable  interest entities for periods ending after March
         15,  2004.  The  Partnership  adopted FIN 46R during the quarter  ended
         March 31,  2004,  which  resulted in the  consolidation  of  previously
         unconsolidated  joint  ventures,  which  were  accounted  for under the
         equity method. FIN 46R does not require, but does permit restatement of
         previously  issued financial  statements.  The Partnership has restated
         prior year's financial statements to maintain comparability between the
         periods presented.  Such  consolidation  resulted in certain assets and
         minority interests,  and revenues and expenses, of these entities being
         reported on a gross basis in the  Partnership's  financial  statements;
         however,  these  restatements had no effect on partners' capital or net
         income.

2.       Reclassification

         Certain  items in the  prior  year's  financial  statements  have  been
         reclassified to conform to 2004 presentation.  These  reclassifications
         had no effect on total partners' capital or net income.

                                       5
<PAGE>

                            CNL INCOME FUND XII, LTD.
                         (A Florida Limited Partnership)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
              Quarters and Six Months Ended June 30, 2004 and 2003


3.       Discontinued Operations

         During 2003, the Partnership  identified for sale three properties that
         were  classified  as  discontinued   operations  in  the   accompanying
         financial  statements.  The  Partnership  sold the  property  in Tempe,
         Arizona in December  2003.  During the six months  ended June 30, 2004,
         the  Partnership  identified  six  additional  properties  for sale and
         reclassified  the  assets to real  estate  held for sale.  Because  the
         current  carrying  amount of these assets is less than their fair value
         less cost to sell, no provision for  write-down of assets was recorded.
         In March 2004, the Partnership sold the properties in Toccoa,  Georgia;
         Blue  Springs,  Missouri;  and  Fultondale,  Alabama to separate  third
         parties and  received  aggregate  net sales  proceeds of  approximately
         $3,357,400  resulting in a gain on disposal of discontinued  operations
         of approximately $968,900.

         The   operating   results  of  these  nine   properties   reflected  as
         discontinued operations are as follows:

<TABLE>
<CAPTION>
<S> <C>
                                                          Quarter Ended                   Six Months Ended
                                                            June 30,                          June 30,
                                                      2004             2003             2004             2003
                                                 --------------   --------------   --------------   --------------
                Rental revenues                  $     109,111    $     161,745    $     267,585    $     319,740
                Expenses                                (1,238)        (12,571)           (5,017)         (36,933)
                                                 --------------   --------------   --------------   --------------
                Income from discontinued
                    operations                   $     107,873    $     149,174    $     262,568    $     282,807

                                                 ==============   ==============   ==============   ==============
</TABLE>

4.       Commitment

         In March 2004, we entered into an agreement  with a third party to sell
         the property in Columbia, Mississippi.

5.       Subsequent Event

         On August 9, 2004, the Partnership entered into a definitive  Agreement
         and Plan of Merger  pursuant  to which the  Partnership  will be merged
         with a subsidiary of U.S. Restaurant Properties,  Inc. (NYSE: USV). The
         merger is one of multiple concurrent  transactions pursuant to which 17
         other  affiliated  limited  partnerships  also  will be  merged  with a
         subsidiary  of  U.S.  Restaurant  Properties,  Inc.  and in  which  CNL
         Restaurant  Properties,  Inc., an  affiliate,  also will be merged with
         U.S.  Restaurant  Properties,  Inc.  CNL  Restaurant  Properties,  Inc.
         currently  provides  property  management  and  other  services  to the
         Partnership.  The merger of the  Partnership  (and each of the 17 other
         affiliated mergers) is subject to certain conditions including approval
         by a majority of the limited partners, consummation of a minimum number
         of limited partnership mergers representing at least 75.0% in value (as
         measured  by the  value of the  merger  consideration)  of all  limited
         partnerships,  consummation  of the  merger  between  U. S.  Restaurant
         Properties,  Inc. and CNL Restaurant Properties,  Inc., approval of the
         shareholders of U.S. Restaurant  Properties,  Inc., and availability of
         financing.  The  transaction is expected to be consummated in the first
         quarter of 2005.

         Under the terms of the  transaction,  the limited partners will receive
         total  consideration  of  approximately  $45.35 million,  consisting of
         approximately $37.92 million in cash and approximately $7.43 million in
         U.S. Restaurant  Properties,  Inc. Series A Convertible Preferred Stock
         that is listed on the New York Stock  Exchange.  The  general  partners
         will receive total  consideration of approximately  $191,000 consisting
         of  approximately   $160,000  in  cash  and  approximately  $31,000  in
         preferred stock.

                                       6
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         CNL Income Fund XII, Ltd. (the "Partnership,"  which may be referred to
as "we," "us," or "our") is a Florida limited  partnership that was organized on
August 20, 1991, to acquire for cash,  either  directly or through joint venture
and  tenancy  in  common  arrangements,  both  newly  constructed  and  existing
restaurants, as well as Properties upon which restaurants were to be constructed
(the  "Properties"),  which are leased  primarily  to  operators of national and
regional fast-food and family-style  restaurant chains. The leases are generally
triple-net leases, with the lessees responsible for all repairs and maintenance,
property taxes, insurance and utilities.  As of June 30, 2003, we directly owned
41 Properties  and owned seven  Properties  indirectly  through joint venture or
tenancy  in common  arrangements.  As of June 30,  2004,  we  directly  owned 37
Properties  and owned  seven  Properties  indirectly  through  joint  venture or
tenancy in common arrangements.

Capital Resources

         For the six months ended June 30, 2004 and 2003,  net cash  provided by
operating activities was $1,941,149 and $1,954,089, respectively.

         During the six months ended June 30, 2004,  we sold the  Properties  in
Toccoa,  Georgia,  Blue Springs,  Missouri and  Fultondale,  Alabama to separate
third  parties  and  received  aggregate  net sales  proceeds  of  approximately
$3,357,400 resulting in an aggregate gain on disposal of discontinued operations
of  approximately  $968,900.  The general  partners  may  reinvest the net sales
proceeds in additional Properties or use the sales proceeds to pay liabilities.

         In addition,  during the quarter and six months ended June 30, 2004, we
amended  the lease for the  Property in Tempe,  Arizona and as a result,  funded
$200,000  of  renovation  costs.  We are not  obligated  to fund any  additional
amounts in the future related to this lease amendment.

         At June 30, 2004, we had  $5,204,819 in cash and cash  equivalents,  as
compared to $2,084,914 at December 31, 2003. At June 30, 2004,  these funds were
held in demand deposit  accounts at a commercial  bank. The increase in cash and
cash  equivalents  at June 30, 2004 was a result of holding  net sales  proceeds
from the sales  described  above.  The funds  remaining at June 30, 2004,  after
payment  of  distributions  and  other  liabilities,  may be used to  invest  in
additional Properties and to meet our working capital needs.

Short-Term Liquidity

         Our  investment  strategy of acquiring  Properties for cash and leasing
them under triple-net leases to operators who meet specified financial standards
minimizes our operating  expenses.  The general partners believe that the leases
will continue to generate cash flow in excess of operating expenses.

         Our  short-term   liquidity   requirements  consist  primarily  of  our
operating expenses.

         The general  partners have the right,  but not the obligation,  to make
additional capital  contributions if they deem it appropriate in connection with
our operations.

         We  generally  distribute  cash  from  operations  remaining  after the
payment of operating  expenses to the extent that the general partners determine
that such funds are available for distribution. Based on current and anticipated
future cash from operations,  we declared  distributions to the limited partners
of $1,912,504  for each of the six months ended June 30, 2004 and 2003 ($956,252
for each applicable quarter). This represents  distributions for each of the six
months  of $0.43  per unit  ($0.21  per unit for each  applicable  quarter).  No
distributions  were made to the general partners for the quarters and six months
ended June 30, 2004 and 2003. No amounts distributed to the limited partners for
the six months  ended  June 30,  2004 and 2003 are  required  to be or have been
treated as a return of capital for purposes of calculating the limited partners'
return on their adjusted  capital  contributions.  We intend to continue to make
distributions of cash to the limited partners on a quarterly basis.

                                       7
<PAGE>

         Total liabilities,  including distributions payable, were $1,276,188 at
June 30, 2004, as compared to $1,259,989 at December 31, 2003.  The increase was
primarily  due to an increase in real  estate  taxes  payable and amounts due to
related  parties.  The increase was partially offset by a decrease in rents paid
in advance and deposits.  The general  partners  believe that we have sufficient
cash on hand to meet our current working capital needs.

Contractual Obligations, Contingent Liabilities, and Commitments

         In March 2004, we entered into an agreement  with a third party to sell
the Property in  Columbia,  Mississippi.  As of August 9, 2004,  we had not sold
this Property.

Long-Term Liquidity

         We have no long-term debt or other long-term liquidity requirements.

Results of Operations

         Rental revenues from continuing  operations were $1,766,766  during the
six months ended June 30, 2004, as compared to $1,757,934 during the same period
of 2003, $901,148 and $878,874 of which were earned during the second quarter of
2004 and 2003, respectively. Rental revenues from continuing operations remained
relatively  constant because all of the changes in the leased property portfolio
related to the Properties accounted for as discontinued operations.

         We earned $75,509  attributable to net income earned by  unconsolidated
joint ventures during the six months ended June 30, 2004, as compared to $84,202
during the same period of 2003,  $39,419 and $42,037 of which were earned during
the quarters ended June 30, 2004 and 2003, respectively. The decrease during the
quarter and six months ended June 30, 2004 was primarily due to the January 2004
expiration  of  the  lease  of the  Property  in  Kingsville,  Texas,  owned  by
Kingsville Real Estate Joint Venture,  in which we have a 31.13%  interest.  The
lost  revenues  resulting  from the lease  expiration  will  continue to have an
adverse effect on the equity in earnings of unconsolidated joint ventures if the
joint venture is not able to re-lease the Property in a timely manner.

         We earned  $32,163 in interest and other  income  during the six months
ended June 30,  2004,  as  compared  to $10,751  during the same period of 2003,
$30,248 and $2,799 of which were earned  during the second  quarters of 2004 and
2003, respectively. Interest and other income were higher during the quarter and
six months  ended June 30, 2004  because we received  reimbursement  of property
expenditures that were incurred in previous years relating to a vacant Property.
The former tenant  reimbursed  these amounts as a result of its 1998  bankruptcy
proceedings.

         Operating expenses,  including  depreciation and amortization  expense,
were $577,898 during the six months ended June 30, 2004, as compared to $496,049
during the same period of 2003,  $265,505  and  $219,608 of which were  incurred
during the quarters ended June 30, 2004 and 2003, respectively.  The increase in
operating  expenses  during the quarter and six months ended June 30, 2004,  was
partially  due to incurring  additional  general  operating  and  administrative
expenses,  including  legal fees.  The increase in  operating  expenses was also
partially  attributable to an increase in state tax expense  relating to a state
in which we conduct business.

         We recognized income from discontinued operations (rental revenues less
property  related  expenses) of $149,174 and $282,807 during the quarter and six
months  ended June 30,  2003,  relating  to the  Properties  in Tempe,  Arizona;
Toccoa, Georgia; Blue Springs,  Missouri;  Fultondale,  Alabama; Black Mountain,
North Carolina; Columbia, Mississippi; Crossville, Tennessee; Pensacola, Florida
and  Simpsonville,  South  Carolina.  We sold the  Tempe,  Arizona  Property  in
December 2003. We recognized income from discontinued operations of $107,873 and
$262,568  during the quarter  and six months  ended June 30,  2004.  We sold the
Toccoa, Georgia; Blue Springs,  Missouri; and Fultondale,  Alabama Properties in
March 2004 and recorded an aggregate gain on disposal of discontinued operations
of  approximately  $968,900.  As of August 9, 2004, the Partnership had not sold
the  Properties  in  Black  Mountain,  North  Carolina;  Columbia,  Mississippi;
Crossville, Tennessee; Pensacola, Florida and Simpsonville, South Carolina.

         In December 2003,  the Financial  Accounting  Standards  Board issued a
revision to FASB Interpretation No. 46 (originally issued in January 2003) ("FIN
46R"),   "Consolidation  of  Variable  Interest  Entities"   requiring  existing

                                       8
<PAGE>

unconsolidated  variable  interest  entities to be consolidated by their primary
beneficiaries.  The primary  beneficiary  of a variable  interest  entity is the
party that  absorbs a  majority  of the  entity's  expected  losses,  receives a
majority  of its  expected  residual  returns,  or both,  as a result of holding
variable  interests,  which are the ownership,  contractual,  or other pecuniary
interests  in an  entity  that  change  with  changes  in the fair  value of the
entity's net assets excluding  variable  interests.  Prior to FIN 46R, a company
generally  included  another  entity  in its  financial  statements  only  if it
controlled  the  entity  through  voting  interests.  Application  of FIN 46R is
required in  financial  statements  of public  entities  that have  interests in
variable  interest  entities for periods ending after March 15, 2004. We adopted
FIN 46R  during  the  quarter  ended  March  31,  2004,  which  resulted  in the
consolidation of previously unconsolidated joint ventures, Williston Real Estate
Joint  Venture,  Bossier City Joint  Venture,  and CNL VIII, X, XII Kokomo Joint
Venture,  which were  accounted  for under the equity  method.  FIN 46R does not
require, but does permit restatement of previously issued financial  statements.
We restated prior year's financial statements to maintain  comparability between
the  periods  presented.  Such  consolidation  resulted  in  certain  assets and
minority interests, and revenues and expenses, of the entities being reported on
a gross basis in our financial  statements;  however,  these restatements had no
effect on partners' capital or net income.

         The general  partners  believe their  primary  objective is to maintain
current operations with restaurant operators as successfully as possible,  while
evaluating  strategic  alternatives,  including  alternatives  that may  provide
liquidity to the limited  partners.  Real estate  markets are strong  throughout
much of the nation,  and the performance of restaurants  has generally  improved
after several  challenging years. As a result, the general partners believe that
this is an attractive  period for a strategic event to monetize the interests of
the limited partners.

         In furtherance of this, on August 9, 2004, we entered into a definitive
Agreement  and  Plan of  Merger  pursuant  to  which  we will be  merged  with a
subsidiary of U.S. Restaurant Properties, Inc. (NYSE: USV). The merger is one of
multiple concurrent  transactions  pursuant to which 17 other affiliated limited
partnerships  also  will  be  merged  with  a  subsidiary  of  U.S.   Restaurant
Properties,  Inc. and in which CNL  Restaurant  Properties,  Inc., an affiliate,
also will be merged with U.S. Restaurant  Properties,  Inc. Our merger (and each
of the 17 other affiliated  mergers) is subject to certain conditions  including
approval by a majority of the limited partners, consummation of a minimum number
of limited partnership mergers representing at least 75.0% in value (as measured
by  the  value  of  the  merger  consideration)  of  all  limited  partnerships,
consummation  of the merger between U. S.  Restaurant  Properties,  Inc. and CNL
Restaurant  Properties,  Inc.,  approval of the shareholders of U.S.  Restaurant
Properties,  Inc., and availability of financing.  U.S.  Restaurant  Properties,
Inc.  is a real  estate  investment  trust  (REIT)  that  focuses  primarily  on
acquiring, owning and leasing restaurant properties. The transaction is expected
to be consummated in the first quarter of 2005.

         Under the terms of the  transaction,  our limited partners will receive
total consideration of approximately $45.35 million, consisting of approximately
$37.92  million  in cash and  approximately  $7.43  million  in U.S.  Restaurant
Properties,  Inc. Series A Convertible Preferred Stock that is listed on the New
York Stock Exchange.  The general  partners will receive total  consideration of
approximately   $191,000  consisting  of  approximately  $160,000  in  cash  and
approximately $31,000 in preferred stock.

         We received an opinion from Wachovia  Capital  Markets,  LLC that as of
August 9, 2004 the merger  consideration  to be  received  by the holders of our
general and limited  partnership  interests is fair,  from a financial  point of
view, to such holders.

         As reflected  above, the  contemplated  transactions  are complex,  and
contingent upon certain conditions. The restaurant marketplace,  the real estate
industry,  and the equities markets, all individually or taken as a whole, could
impact the  economics of this  transaction.  As a result,  there is no assurance
that we will be successful in completing the contemplated transaction.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Inapplicable.

                                       9
<PAGE>

ITEM 4.  CONTROLS AND PROCEDURES


         The  general  partners  maintain  a  set  of  disclosure  controls  and
procedures  designed to ensure that information  required to be disclosed in our
filings  under  the  Securities  Exchange  Act of 1934 is  recorded,  processed,
summarized and reported within the time periods  specified in the Securities and
Exchange  Commission's  rules and forms.  The principal  executive and financial
officers of the corporate general partner have evaluated our disclosure controls
and procedures as of the end of the period  covered by this Quarterly  Report on
Form 10-Q and have determined  that such disclosure  controls and procedures are
effective.

         There was no change in internal  control over financial  reporting that
occurred during the most recent fiscal quarter that has materially affected,  or
is  reasonably  likely to materially  affect,  internal  control over  financial
reporting.


                                       10
<PAGE>

                           PART II. OTHER INFORMATION


Item 1.  Legal Proceedings.   Inapplicable.
         -----------------

Item 2.  Changes in Securities.   Inapplicable.
         ---------------------

Item 3.  Default upon Senior Securities.   Inapplicable.
         ------------------------------

Item 4.  Submission of Matters to a Vote of Security Holders.   Inapplicable.
         ---------------------------------------------------

Item 5.  Other Information.   Inapplicable.
         -----------------

Item 6.  Exhibits and Reports on Form 8-K.
         --------------------------------

         (a)  Exhibits

              3.1  Affidavit  and  Certificate  of  Limited  Partnership  of CNL
                   Income   Fund  XII,   Ltd.   (Included   as  Exhibit  3.2  to
                   Registration  Statement  No.  33-43278-01  on Form  S-11  and
                   incorporated herein by reference.)

              4.1  Affidavit  and  Certificate  of  Limited  Partnership  of CNL
                   Income   Fund  XII,   Ltd.   (Included   as  Exhibit  3.2  to
                   Registration  Statement  No.  33-43278-01  on Form  S-11  and
                   incorporated herein by reference.)

              4.2  Amended and Restated Agreement of Limited  Partnership of CNL
                   Income Fund XII,  Ltd.  (Included as Exhibit 4.2 to Form 10-K
                   filed with the  Securities  and Exchange  Commission on April
                   15, 1993, and incorporated herein by reference.)

              10.1 Management  Agreement  between CNL Income Fund XII,  Ltd. and
                   CNL  Investment  Company.  (Included  as Exhibit 10.1 to Form
                   10-K filed with the  Securities  and Exchange  Commission  on
                   April 15, 1993, and incorporated herein by reference.)

              10.2 Assignment  of  Management   Agreement  from  CNL  Investment
                   Company  to CNL  Income  Fund  Advisors,  Inc.  (Included  as
                   Exhibit  10.2 to Form  10-K  filed  with the  Securities  and
                   Exchange  Commission  on March  31,  1995,  and  incorporated
                   herein by reference.)

              10.3 Assignment  of  Management  Agreement  from CNL  Income  Fund
                   Advisors,  Inc.  to CNL  Fund  Advisors,  Inc.  (Included  as
                   Exhibit  10.3 to Form  10-K  filed  with the  Securities  and
                   Exchange Commission on April 1, 1996, and incorporated herein
                   by reference.)

              10.4 Assignment of Management  Agreement  from CNL Fund  Advisors,
                   Inc. to CNL APF  Partners,  LP.  (Included as Exhibit 10.4 to
                   Form 10-Q filed with the Securities  and Exchange  Commission
                   on August 13, 2001, and incorporated herein by reference.)

              10.5 Assignment of Management Agreement from CNL APF Partners,  LP
                   to CNL Restaurants  XVIII, Inc.  (Included as Exhibit 10.5 to
                   Form 10-Q filed with the Securities  and Exchange  Commission
                   on August 13, 2002, and incorporated herein by reference.)

                                       11
<PAGE>

              31.1 Certification of Chief Executive Officer of Corporate General
                   Partner  Pursuant  to Rule  13a-14  as  Adopted  Pursuant  to
                   Section  302  of  the  Sarbanes-Oxley  Act  of  2002.  (Filed
                   herewith.)

              31.2 Certification of Chief Financial Officer of Corporate General
                   Partner  Pursuant  to Rule  13a-14  as  Adopted  Pursuant  to
                   Section  302  of  the  Sarbanes-Oxley  Act  of  2002.  (Filed
                   herewith.)

              32.1 Certification of Chief Executive Officer of Corporate General
                   Partner  Pursuant  to  18  U.S.C.  Section  1350  as  Adopted
                   Pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002.
                   (Filed herewith.)

              32.2 Certification of Chief Financial Officer of Corporate General
                   Partner  Pursuant  to  18  U.S.C.  Section  1350  as  Adopted
                   Pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002.
                   (Filed herewith.)

         (b)  Reports on Form 8-K

              No reports on Form 8-K were filed  during the  quarter  ended June
              30, 2004.


                                       12
<PAGE>

                                   SIGNATURES


         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

         DATED this 9th day of August 2004.


                       CNL INCOME FUND XII, LTD.

                       By:   CNL REALTY CORPORATION
                             General Partner


                             By:   /s/ James M. Seneff, Jr.
                                  ----------------------------------------------
                                   JAMES M. SENEFF, JR.
                                   Chief Executive Officer
                                   (Principal Executive Officer)


                             By:   /s/ Robert A. Bourne
                                  ----------------------------------------------
                                   ROBERT A. BOURNE
                                   President and Treasurer
                                   (Principal Financial and
                                   Accounting Officer)

<PAGE>

                                  EXHIBIT INDEX

Exhibit Number

         (c)  Exhibits

              3.1  Affidavit  and  Certificate  of  Limited  Partnership  of CNL
                   Income   Fund  XII,   Ltd.   (Included   as  Exhibit  3.2  to
                   Registration  Statement  No.  33-43278-01  on Form  S-11  and
                   incorporated herein by reference.)

              4.1  Affidavit  and  Certificate  of  Limited  Partnership  of CNL
                   Income   Fund  XII,   Ltd.   (Included   as  Exhibit  3.2  to
                   Registration  Statement  No.  33-43278-01  on Form  S-11  and
                   incorporated herein by reference.)

              4.2  Amended and Restated Agreement of Limited  Partnership of CNL
                   Income Fund XII,  Ltd.  (Included as Exhibit 4.2 to Form 10-K
                   filed with the  Securities  and Exchange  Commission on April
                   15, 1993, and incorporated herein by reference.)

              10.1 Management  Agreement  between CNL Income Fund XII,  Ltd. and
                   CNL  Investment  Company.  (Included  as Exhibit 10.1 to Form
                   10-K filed with the  Securities  and Exchange  Commission  on
                   April 15, 1993, and incorporated herein by reference.)

              10.2 Assignment  of  Management   Agreement  from  CNL  Investment
                   Company  to CNL  Income  Fund  Advisors,  Inc.  (Included  as
                   Exhibit  10.2 to Form  10-K  filed  with the  Securities  and
                   Exchange  Commission  on March  31,  1995,  and  incorporated
                   herein by reference.)

              10.3 Assignment  of  Management  Agreement  from CNL  Income  Fund
                   Advisors,  Inc.  to CNL  Fund  Advisors,  Inc.  (Included  as
                   Exhibit  10.3 to Form  10-K  filed  with the  Securities  and
                   Exchange Commission on April 1, 1996, and incorporated herein
                   by reference.)

              10.4 Assignment of Management  Agreement  from CNL Fund  Advisors,
                   Inc. to CNL APF  Partners,  LP.  (Included as Exhibit 10.4 to
                   Form 10-Q filed with the Securities  and Exchange  Commission
                   on August 13, 2001, and incorporated herein by reference.)

              10.5 Assignment of Management Agreement from CNL APF Partners,  LP
                   to CNL Restaurants  XVIII, Inc.  (Included as Exhibit 10.5 to
                   Form 10-Q filed with the Securities  and Exchange  Commission
                   on August 13, 2002, and incorporated herein by reference.)

              31.1 Certification of Chief Executive Officer of Corporate General
                   Partner  Pursuant  to Rule  13a-14  as  Adopted  Pursuant  to
                   Section  302  of  the  Sarbanes-Oxley  Act  of  2002.  (Filed
                   herewith.)

              31.2 Certification of Chief Financial Officer of Corporate General
                   Partner  Pursuant  to Rule  13a-14  as  Adopted  Pursuant  to
                   Section  302  of  the  Sarbanes-Oxley  Act  of  2002.  (Filed
                   herewith.)

              32.1 Certification of Chief Executive Officer of Corporate General
                   Partner  Pursuant  to  18  U.S.C.  Section  1350  as  Adopted
                   Pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002.
                   (Filed herewith.)

              32.2 Certification of Chief Financial Officer of Corporate General
                   Partner  Pursuant  to  18  U.S.C.  Section  1350  as  Adopted
                   Pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002.
                   (Filed herewith.)
<PAGE>



                                  EXHIBIT 31.1


<PAGE>



                                  EXHIBIT 31.2


<PAGE>



                                  EXHIBIT 32.1


<PAGE>



                                  EXHIBIT 32.2